20-1808

20-1808. Ratio of assets to liabilities;
report; rehabilitation of provider

A. The provider shall possess assets in the first year of operation equal to at
least seventy-five per cent of the unamortized endowment fees plus all other liabilities
including long-term debt. The unamortized endowment fees shall be based on life
expectancy of purchasers. Thereafter, the provider shall at all times possess assets in
an amount sufficient to assure full performance of the obligations of the provider
pursuant to life care contracts including any reserve fund escrow required by the
director pursuant to section 20-1806.

B. If revenues or funds including reserves are inadequate or projected to be
inadequate pursuant to the annual report or an actuarial report or if the provider does
not meet the requirements of subsection A of this section, the director may employ an
independent management consultant experienced in the operation of life care facilities,
at the expense of the provider, who shall examine the financial structure and operations
of the provider and make recommendations on remedial action to the director. The
director shall not be bound by such recommendations.

C. At any time the director receives notice from the escrow agent that section
20-1806 has not been complied with, or at any other time when the director has reason to
believe that the provider is in a financially unsound or unsafe condition, or that its
condition is such that it may otherwise be unable to fully perform its obligations
pursuant to life care contracts, or when the provider fails to implement the director's
recommendations as a result of a management consultant's report or when it is obvious to
the director that to obtain the services of a financial consultant under subsection B of
this section would be futile, the director, through the attorney general, shall apply to
the superior court in the county in which the provider's facility is located for an order
directing him to assume management and possession of the provider's facility and to
rehabilitate the provider to enable it to fully perform its obligation pursuant to life
care contracts. The court shall act upon the application upon notice to the provider,
and any objection to the petition shall be filed with the court within the time
prescribed by such notice.

D. If the court upon hearing finds that the provider is in a financially unsound or
unsafe condition or that its condition is such that it may otherwise be unable to fully
perform its obligations pursuant to life care contracts, the court shall issue an order
directing the director to take possession of the property of the provider and to conduct
the business thereof, and to take such steps toward removal of the causes and conditions
which have made rehabilitation necessary, as the court may direct. The order shall
include a provision directing the issuance of a notice of the rehabilitation proceedings
to the residents at such facility and to such other interested persons as the court shall
direct.

E. Appointment of the director to rehabilitate a provider shall authorize the
director to:

1. Take possession of and preserve, protect and recover any assets, books and
records or property of the provider, including claims or causes of action belonging to or
which may be asserted by the provider and to deal with such property in his own name in
the capacity as director, and purchase at any sale any real estate or other asset upon
which the provider may hold any lien or encumbrance or in which it may have an interest.

2. File, prosecute and defend or compromise any suit or suits which have been filed
or which may thereafter be filed by or against such provider which are deemed by the
director to be necessary to protect the provider or the residents or any property
affected thereby.

3. Take possession of and deposit and invest any of the provider's available funds.

4. Pay all expenses of the rehabilitation.

5. Exercise such other powers and duties as may be provided by order of the court.

6. Appoint managers, supervisors or employees necessary to properly manage and
operate the provider and the provider's facility.

7. Take possession of and, with the prior approval of the court, sell, exchange,
lease, mortgage or otherwise dispose of any property of the provider by public sale,
bidding or otherwise.

8. With the prior approval of the court, borrow money with or without security for
the purpose of facilitating the rehabilitation of the provider.

9. Perform all duties of the provider.

10. Reject any executory contract to which the provider is a party.

11. Withdraw any sums remaining in the escrow account established pursuant to
section 20-1806 for the purpose of rehabilitating the provider's facility.

F. The court may at any time during a rehabilitation proceeding issue such other
instructions or orders as are deemed necessary to aid the director in the rehabilitation
proceeding.

G. The director, or any interested person upon due notice to the director, at any
time may apply to the court for an order terminating the rehabilitation proceedings and
permitting the provider to resume possession of its property and the conduct of its
business, but no such order shall be granted except when, after a full hearing, the court
has determined that the purposes of the proceeding have been fully accomplished and that
the facility can be returned to the provider's management without further jeopardy to the
residents of the facility, creditors, owners of the facility, and to the public. An
order terminating the rehabilitation proceeding shall be based upon a full report and
accounting by the director of the conduct of the provider's officers during the
rehabilitation and of the provider's current financial condition.

H. If at any time the director deems that further efforts to rehabilitate the
provider would be useless, he may report to the court and apply for an order of
liquidation and dissolution pursuant to title 10, chapter 14, article 3, if a
corporation, or may apply for other appropriate relief for dissolving the provider and
winding up its affairs. An order directing the liquidation or dissolution of the
provider shall act as a revocation of the provider's permit issued pursuant to section
20-1803.

I. In connection with the rehabilitation proceedings, the director may appoint one
or more special deputy directors of insurance to act for him and may employ such counsel,
clerks or assistants as he deems necessary. The compensation of the special deputies,
counsel, clerks or assistants and any expenses of taking possession of the provider's
facility and of conducting the proceedings shall be set by the director, subject to
approval of the court, and shall be paid out of the funds or assets of the provider.